Economist, Muyembe, says MPR hike likely to push up production cost, fuel higher inflation

Economist Mathews Muyembe says the new Monetary Policy Rate (MPR) will have a negative impact on the economy as the measure will push the cost of doing business up.

The Policy Monetary Committee (MPC) of the Bank of Zambia (BoZ) recently raised the MPR by 100 basis points to 13.5 from 12.5 percent in the last session.

“While MPR has been raised by 100 basis points..is that the best solution to curb our inflation rate. For fear of inflation averaging 13.8 percent?” he asked.

In an interview on Friday, Muyembe said: “My concern, we seem to have more of ‘cost push inflation’ ..imported inflation from South Africa….as well as other jurisdictions.”

He noted that the majority of Zambians were in the informal sector which meant that raising “our MPR will push up interest rates and have the contractionary effect on money supply which is not really a holistic solution.

“We could have done more beyond running models that only consider mainstream businesses. What measures do we have in the informal sector?” Muyembe stated.

“At this rate we will just continue increasing our MPR as a text book monetary policy control exercise..we need to interrogate these interventions in view of our prevailing economic conditions- natural disasters and current business pulse,” Muyembe said.

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